Goldman bought a warehouse full of aluminum and is sitting on it. Nobody's figured out how this is a brilliant scheme. http://www.nytimes.com/2013/07/21/business/a-shuffle-of-aluminum-but-to-banks-pure-gold.html The story of how this works begins in 27 industrial warehouses in the Detroit area where a Goldman subsidiary stores customers' aluminum. Each day, a fleet of trucks shuffles 1,500-pound bars of the metal among the warehouses. Two or three times a day, sometimes more, the drivers make the same circuits. They load in one warehouse. They unload in another. And then they do it again. ⦠Metro International [said subsdiary] holds nearly 1.5 million tons of aluminum in its Detroit facilities, but industry rules require that all that metal cannot simply sit in a warehouse forever. At least 3,000 tons of that metal must be moved out each day. But nearly all of the metal that Metro moves is not delivered to customers, according to the interviews. Instead, it is shuttled from one warehouse to another. Because Metro International charges rent each day for the stored metal, the long queues caused by shifting aluminum among its facilities means larger profits for Goldman. And because storage cost is a major component of the "premium" added to the price of all aluminum sold on the spot market, the delays mean higher prices for nearly everyone, even though most of the metal never passes through one of Goldman's warehouses. â¦
I guess they are arguing that GS is inflating the price of aluminum by sitting on it and not selling until the price is high. Anyone who understands the basics of how markets work would have to be skeptical of this. Furthermore, hard to imagine there there is a good return to be made if you have to greatly add to costs by hiring drivers to drive your aluminum around everyday.
Good point. Hiring drivers, operators in between warehouses just for storage costs??? Interesting article though.
============================ Well its fun while it lasted ; then the SEC gets $500 million out of them Rinse + repeat. Then SEC goes after one trader; fab $500 they called him ???.LOL Goldman inflating???Not on the taxpayers dime anymore Amen